The Essex County housing market started the year strong, with a surge of sales activity. But even with demand up, prices went down sharply, indicating that the county has not yet developed into a “seller’s market.”
Sales. Essex County sales were up sharply in the first quarter, rising over 13% for the quarter, marking the fifth straight quarter of year on year sales growth. The long.term trend is also encouraging, with sales up over 10% for the rolling.year and now regularly clearing almost 5,000 yearlong sales, which is comparable to what we saw at the tail end of the last seller’s market.
Prices. This spike in sales activity did not, though, have its expected impact on pricing. Prices were down sharply, dropping over 8% in the average and 4% at the median. And after some modest price appreciation in 2015, the long.term trend turned downward, with the weak first quarter driving the rolling year average and median both down almost 1%. Why would prices go down as sales go up? One explanation could be that the market was relatively stronger in the lower priced entry level markets, which would change the mix of the properties sold and drive down the overall pricing. We will keep our eye on this dynamic for the next Report.
Inventory. The “months of inventory” indicator measures how long it would take to sell out the existing inventory of homes at the current rate of home sales. In the industry, we generally consider anything below six months as a signal for a seller’s market, where tight inventory leads to multiple-offer situations, bidding wars, and ultimately appreciating prices. Essex has already crossed that threshold, which is what makes the decline in pricing so surprising. Given how tight inventory is, we do expect to see some meaningful appreciation in the spring market.
Negotiability. The negotiability indicators – the amount of time sold homes were on the market, and the rate at which sellers were able to retain their full asking price – suggested the sellers might be gaining a little bit of negotiating leverage. The days on market fell almost 5%, indicating that homes were selling more quickly. And the listing price retention rate was up sharply, cresting 98%, indicating that homes are selling for closer to the asking price.
Going forward, we expect that Essex County’s sales activity will eventually have a meaningful impact on pricing. With homes still at historically affordable prices, interest rates low, and a generally improving economy, we believe that buyer demand will strengthen and drive more meaningful price appreciation in a robust spring market and throughout 2016.